Downing Street has said retirees with no other income will not pay tax on the full new state pension, after official figures signalled a 3.9% triple lock increase in 2027 that would push the payment above the tax-free personal allowance.
Key facts
- Average UK wages rose by 3.9% in the three months to July.
- That figure signals pensioners will receive a 3.9% uplift in 2027 under the triple lock.
- The increase is expected to push the full new state pension above the tax-free personal allowance.
- No 10 says retirees with no other income will be excluded from paying tax on the full new state pension.
The UK government has promised that retirees will be excluded from paying tax on the full new state pension, according to the Guardian, after official figures paved the way for an inflation-beating increase that would take the payment above the tax-free personal allowance.
Figures published on Tuesday showed that average UK wages rose by 3.9% in the three months to July. Under the triple lock, that wage growth signals pensioners will receive an uplift of the same percentage next year.
The triple lock guarantees that the state pension rises each year by the highest of average earnings growth, inflation or 2.5%. In this instance, the 3.9% earnings figure is set to determine the 2027 increase.
The prospect of the full new state pension rising above the personal allowance had raised questions about whether pensioners relying solely on that income could be dragged into paying income tax. Downing Street’s assurance is aimed at addressing those concerns.
According to No 10, retirees with no other income will not pay tax on the full new state pension, even as the payment approaches the £13,000 level referenced in reporting on the increase.
The commitment comes amid wider economic data covering pay growth, interest rates, unemployment, inflation and oil prices, with the wage figures central to the annual pension uplift calculation.
Why it matters
The state pension is the main or only source of income for many retirees, so whether it is taxed directly affects household budgets. The government's promise seeks to reassure pensioners that an inflation-beating rise will not push those with no other income into paying income tax.
Frequently asked questions
How much will the state pension rise next year?
Official figures showed average wages rose by 3.9% in the three months to July, signalling pensioners will receive an uplift of the same percentage in 2027 under the triple lock.
Will pensioners have to pay tax on the new state pension?
According to No 10, retirees with no other income will not pay tax on the full new state pension, even though the increase is expected to take it above the tax-free personal allowance.
What is the triple lock?
The triple lock is the policy under which the state pension rises each year. In this case, the 3.9% average wage growth figure is set to drive the 2027 increase.